A topic that repeatedly comes up in case law and practice is the question of the consequences of an employer paying fines or warning fees that affect their employees.
In most cases, such questions arise in the area of traffic law, namely when an employee incurs such a fine during a business trip. For example, due to a speeding ticket for excessive speed, a violation of driving times by a truck driver or even a simple parking ticket for a parking violation, to name just a few of the more common examples. Ultimately, the question concerns the entire range of administrative offense law.
All income and other benefits accruing to the employee from the employment relationship are wages. It does not matter whether the payment is made directly to the employee or to a third party on the employee's behalf. On the other hand, there is no remuneration if the benefit is not to be assessed as remuneration but as a "necessary corollary of an operational objective" (according to the wage tax guidelines). Or to put it more simply: the benefit has been granted on the basis of an overriding interest of the employer's own business.
In this context, the Federal Fiscal Court (BFH as the highest court of the fiscal jurisdiction) has regularly assessed administrative and warning fines as not being operationally intended, so that payments by the employer led to a cash inflow for the employee, which was subject to wage tax. The employee had to declare this in his or her income tax return. Where applicable, this taxation is already fulfilled by the employer's wage tax registration. The expense does not constitute deductible income-related expenses either.
However, in 2004 the Federal Fiscal Court ruled that parking violations would be in the interest of the employer if they enabled the business to be transacted quickly (Federal Fiscal Court ruling dated July 7, 2004 – VI R 29/00). In practice, this often applied in particular to parcel delivery staff, freight forwarders and taxi drivers.
However, the Federal Fiscal Court overturned this case law in 2013 (Federal Fiscal Court judgment of November 14, 2013 – VI R36/12). It found that illegal behavior by an employee generally cannot be accepted and tolerated; it is therefore never in the overriding business interest of the employer, even if the employer has given its drivers instructions to that effect. The BFH therefore changed its case law and also subjected parking tickets to payroll tax.
The BFH has now had to deal with another case of this kind. It involved a parcel delivery driver who – as we all know – parked illegally in order to deliver his parcels quickly. The renewed dispute on the subject stemmed from the fact that the fine was not imposed on the driver (employee), but was directed to the employer as the owner of the vehicle. The BFH therefore correctly stated that the employer was settling his own debt here and not that of his employee.
But: it was too early to celebrate!
The BFH then states that the employer has a claim for reimbursement against his employee for the paid warning fine arising from the employment relationship, since the employee committed the violation. If the employer does not assert this claim, the advantage accrues to the employee and then we are back to the previous result. The waiver of the right of recourse is equivalent to an inflow. The payments are to be subject to wage tax as wages (BFH of August 13, 2020 – VI R 1/17). The same applies to social security contributions.
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.